WEBINAR:

A Senate panel took up debate on one of the central planks of the Federal Communications Commission's broadband plan Thursday morning, but as with many of the commission's recent activities, much of the debate turned on a controversial proposal to re-impose regulatory oversight of the Internet services sector.

The nominal focus of today's hearing was the Universal Service Fund, the $9 billion federal subsidy to bring low-cost telephone service to low-income and rural Americans.

The three commissioners who appeared at today's hearing -- two Democrats and one Republican -- and senators of both parties agreed that the fund is in sore need of an overhaul to divert money away from telephone service and toward broadband access.

That effort was one of the core recommendations of the national broadband plan the FCC submitted to Congress in March. The plan called for phasing out the current USF over 10 years and reallocating the money to a Connect America Fund and a separate program for mobile broadband, all without increasing the overall size of the subsidy.

In the second of two panels at today's hearing, representatives of rural carriers outlined their objections to the FCC's plan. They expressed concerns that it would leave them short of the critical funding needed to reach remote households and businesses far off the beaten path where there isn't a viable business case to extend service.

But in the context of the broader policy debate in which the FCC is currently embroiled, those objections seemed almost an afterthought, evidenced by the precipitous drop-off in attendance among the senators following the first panel of testimony from the commissioners.

That controversy stems from the proceeding the FCC initiated last week that could pave the way for reclassifying broadband as a regulated telecommunications service under federal communications law.

FCC Chairman Julius Genachowski said the move was necessary to clarify the commission's regulatory authority following a legal setback at the hands of a federal appeals court earlier this year. That court case overturned a 2008 order punishing Comcast for secretly blocking traffic on its data network, but the court's opinion called into question the FCC's legal authority on a host of related issues, including USF reform.

Genachowski and his two Democratic colleagues voted in favor of the notice of inquiry to seek comments on the proposal over the strenuous objections of the two Republican commissioners.

That same partisan fissure was on display at today's hearing, with senators jousting over the efficacy and consequences of the reclassification proceeding.

"The need for universal service to support the advance communications networks in this country is why I believe the FCC should move ahead with this reclassification," said Byron Dorgan (D-N.D.). "I know that's controversial, but I want to make the point that I think it's essential."

He added, "High-speed judgment is, in my judgment, not a luxury but a necessity for participating in this 21st century economy."

Republican members were in agreement only to the point that USF reform, which has languished on the FCC's agenda for at least a decade, is long overdue. But some expressed the legal opinion, advanced by industry members such as AT&T, that the court ruling in the Comcast case was of narrow scope and that the FCC is on solid footing to overhaul the fund without moving broadband out of its current designation as a so-called Title I service.

That also remains a point of debate within the commission itself.

"People are interpreting the Comcast decision too broadly," Republican Commissioner Meredith Attwell Baker told the panel today. "I think that we do have the authority to reform universal service under the current structure of Title I."

The two Democratic commissioners at the hearing, Michael Copps and Mignon Clyburn, disagreed, arguing that that move is necessary to avoid the piecemeal legal challenges that would inevitably follow each controversial action it were to take under the current classification.

But GOP lawmakers at today's hearing made an economic argument against reclassification, echoing the cable and telecom industries' warning that the inevitable result of increased regulation, despite Genachowski's assurances that it will be limited, will be a cooling in investment in the capital expenditures needed to bring broadband service to the same areas where USF money would flow.

In that sense, argued Nevada Republican John Ensign, the FCC is working at cross purposes.

"If the FCC reclassifies and if broadband investment really does shrink, what parts of the country do you think will suffer the most from this loss of investment? We all know that it is not going to be Los Angeles or New York," Ensign said.

Opponents of reclassification argue that it falls to Congress to update the Communications Act to clarify the FCC's role in regulating broadband service. The Democratic commissioners have expressed support for a legislative overhaul, but argued that the FCC must act in the interim to shore up its own authority to enact its broadband agenda, describing the efforts as "complimentary."

The work on revamping the Communications Act will begin in earnest Friday, when the bipartisan leadership of the relevant committees and subcommittees in the House and Senate are scheduled to hold the first of a series of meetings with industry representatives and other stakeholders to discuss the proper boundaries of FCC authority.

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